Skip to main content
Fulton Bank
Fulton Bank

WARNING :

Due to system maintenance, you may experience intermittent outages of some of our systems April 12 – April 14.

5 Tips to Level Up How You Budget

One of the best ways to improve your financial situation is to set a budget and stick to it. But that is easier said than done, and there are no one-size-fits-all solutions. Nevertheless, in 2022, 86% of Debt.com survey respondents tracked their income and expenses every month, and 88% said budgeting has helped them pay down or get out of debt.

If you've budgeted in the past but haven't seen results from tracking your income and expenses, or you're considering budgeting for the first time, learn the basics of budgeting and how to level up how you budget.

 

What is a budget?

A budget tracks how much money comes into and goes out of your bank account. Budgets can be weekly, biweekly, or monthly. Your budget should include fixed costs that don't change, like rent and insurance, and variable expenses, like groceries and gas. Some budgets only track income and expenses, while others also track contributions to savings like retirement, saving for a home, or travel.

 

Is there only one way to budget?

There are many ways to budget. The right budget depends on various factors, including your unique personality, how you prefer to visualize your budget, and how much time you want to spend tracking your finances. Some common budgeting methods include:

  • The envelope method — Split your money up into physical or virtual envelopes that represent a spending category, and only let yourself spend until the cash is gone.

  • Zero-sum budgeting — Allocate every last dollar of your money so that your income minus your expenses and savings equals zero.

  • Pay yourself first budgeting — Put money aside for savings and debt repayment first, and then spend the rest.

You can also use many methods to track your budgeting, including an old-fashioned pen and paper, digitally via Excel or Google Sheets, or using an app or your bank’s online and mobile banking. Many banks offer features that help you budget, like Money Management. 

Common new-budgeter mistakes

New budgeters tend to make rookie mistakes that can make the process more challenging and can lead you to give up altogether. Below are common budgeting mistakes and how to avoid them.

       

    • Budgeting too aggressively
    • It's common to create a budget based on what you think you spend, not based on your actual spending habits. For example, suppose you budget $400 monthly to spend on groceries and entertainment. But you typically spend closer to $800 in this category. You'll find it extremely challenging and discouraging to try and hit that lower number.

      Fortunately, this mistake has an easy fix. Before creating a budget, track everything you spend for at least a month. This tracking will show you how much you're spending, and then you can build a budget based on realistic expectations.


    • Failing to account for one-off expenses
    • A second common budgeting mistake is to account for your monthly expenses but forget about random yearly expenses. Costs like annual subscription renewals, credit card annual fees, taxes or insurance, and even birthday gifts can send a well-made budget into turmoil.

      A great way to account for one-time or unexpected expenses is to build a slush fund of a few hundred dollars monthly. Then, deposit this extra money into a savings account and use it to manage unplanned expenses.


    • Choosing a budgeting method that’s too complicated
    • It can be fun to get inspired and build a beautiful budgeting spreadsheet that tracks every aspect of money management. Still, those types of budgets take a lot of work to maintain, and once your inspiration wanes, your fancy budget might fall by the wayside.

      If you are new to budgeting, start with a simple budget. It will be easier to stick to, which will be best for your finances in the long run.

    Budgeting when inflation is on the rise

    If you aren’t new to budgeting, but it seems like in the last year, you're sometimes getting to the end of your budget before you get to the end of the month.

    Chances are, it's not you — it's inflation! Inflation, which is the increase in the cost of general goods and services over time, has been on the rise since April 2021 and, despite the federal government's efforts to bring it under control, has remained high.

    Higher inflation means that staples like gas and groceries are now more expensive. The result is that your budget might be feeling tighter, even if your spending habits haven't changed. However, you can offset inflation by reducing your spending in vulnerable areas (for example, driving less and shopping sales at the grocery store) or by increasing your budget and spending less in other areas.

    Tips to improve your budgeting skills

    Budgeting is a powerful tool to help you pay off debt and reach your financial goals. Here are tried-and-true tips to improve your budgeting skills this year.

    1. Level up your tech

    Your options for budgeting aren't limited to a pen and paper or spreadsheet. Today, many apps and software programs are available to help you manage your money. Some apps even allow you to automatically import your transactions, significantly reducing the time required to track your spending and ensure you stay on budget.

    2. Earn rewards for free stuff

    Consider moving your spending to a rewards credit card and enjoy earning cash back or travel rewards on every dollar spent. Some rewards credit cards have rewards programs that can result in hundreds of dollars of cash back or even qualify for free trips. These rewards can easily replace spending in your budget and allow your money to go further.

    3. Reverse engineer your budget

    If you have a specific financial goal in mind like paying off debt or saving for a home, consider reverse engineering your budget to reach your goals. For example, suppose you want to pay off $10,000 in debt. Pick your timeframe to complete the goal and work backwards. To pay it off in one year you’d need to pay at least $833 per month, to do it in two or three years, $416 and $277 respectively. If you can factor this amount into your budget now, you'll be sure to reach your goal.

    4. Practice no-spend days

    If you're struggling to stay on budget and avoid unnecessary spending on everyday items, consider implementing no-spend days. No-spend days are designated days where you do not purchase anything, which helps avoid impulse spending. Start slow with one no-spend day per week, and increase it gradually.

    Budgeting can help you pay off debt or save for your future. And while budgeting can be challenging, these tips will help set you up for successful spending and saving this year and beyond.

     

Did you find this article helpful?

3
0